Article reference: UK-IA-EMP49

Dismissal from employment

A definition of dismissal

The precise meaning of dismissal is very important.

If a person has not been dismissed, he will not be able to claim compensation for unfair dismissal, nor will he be able to claim dismissal by reason of redundancy.

There are only 4 circumstances in which an employee is dismissed:

  • on termination of the employee's contract by the employer, with or without notice
  • on the expiry of a fixed term contract without renewal
  • through constructive dismissal
  • refusal to be allowed to return to work after maternity leave

If a resignation is forced, it may count as dismissal.

If an employer keeps on an employee, but significantly changes the contractual terms (such as on moving employees to zero hour contracts), the employer is likely to be terminating the existing contract and the employee will have been dismissed from the original employment.

Constructive dismissal

As a general rule, an employee who resigns in circumstances such that he is entitled to terminate without notice by reason of the employer's conduct is treated as having been dismissed. This is generally wrongful dismissal. It may also be unfair dismissal and/or redundancy.

An employee, who resigns purely because he decides to, is not dismissed at all and therefore can bring no claim against the employer.

Resignation in protest against an employer's refusal to pay the National Minimum Wage is an example of a situation in which an employee may be able to claim that he had been constructively dismissed.

From the employer's point of view, the consequences of constructive dismissal can be more serious than simply having to pay damages. On termination of the contract by the employee, the rights he previously had under it are void. It will therefore be likely that an employer will not be able to enforce post-termination restrictive covenants in a senior employee's service contract and/or the requirement that the employee must serve out a minimum notice period.

If an employer does something in relation to an employee that breaches the employee's contract, the employee can be entitled to resign and claim constructive dismissal. The employee is likely to be able to bring an unfair dismissal claim under the Employment Rights Act 1996. Discriminative actions in these circumstances are slightly more complicated and follow their own specific rules.

A change in terms of employment can occur at any time but is especially likely when a business is sold or otherwise transferred to new owners. The employee retains his normal common law right to treat himself as constructively dismissed if a substantial change to his conditions is made to his detriment.

Wrongful dismissal

Breach of contract and wrongful dismissal typically refers to the same thing. Wrongful dismissal is the name given to a breach of an employment contract by an employer which is connected with the actual dismissal or the constructive dismissal of an employee (for example failure to give an employee the length of notice to which he is entitled under his contract). Of course breach of contract has a wider meaning than wrongful dismissal as it does not necessarily result in dismissal.

Breach of contract and wrongful dismissal are common law concepts. They have traditionally been and still frequently are dealt with by the ordinary courts of law.

Wrongful dismissal and breach of contract are quite different from unfair dismissal.

Unfair dismissal is a statutory invention, governed by Acts of Parliament and dealt with by employment tribunals not by the courts. Unfair dismissal can, and frequently does, occur without there being any breach of contract or wrongful dismissal.

It is a relatively new concept, having been in existence in Great Britain only since the passing of the Industrial Relations Act 1971.

Frequently unfair dismissal will also be wrongful dismissal (and vice versa) but not always. The only remedy for unfair dismissal is to present a complaint to an employment tribunal.

Cases of wrongful dismissal typically occur when an employer dismisses an employee without giving the notice required by the employee's contract, and without adequate compensation in lieu. In practice, it is usually only worthwhile for the employee to sue if the contract provides a fairly long notice period. This is because damages will be assessed by reference to the loss suffered, which will normally be limited to the value of lost remuneration and lost perks for the period of notice that the employer should have given.

Instant dismissal

Instant dismissal or summary dismissal is the dismissal of an employee on the spot, without notice.

Normally an employee will be entitled to the notice period provided by his her contract or to the relevant minimum statutory notice period if greater. Only in exceptional circumstances will dismissal without notice be justified. If instant dismissal is justified there is a specific exemption from any requirement to give notice.

If the dismissal is justified it will not be wrongful dismissal. It may however still be unfair dismissal and normally will be if the employer has failed to consult the matter with the employee.

Written reasons for dismissal

The basic rule is that an employee who has been dismissed can require the employer to give him a written statement giving particulars of the reasons for the employee's dismissal. An employee must be given this written statement without request if dismissed while pregnant or on maternity leave or on adoption leave.

Employees who have completed less than one year's continuous employment by the date of termination do not qualify for this right unless dismissed while pregnant or on maternity leave or adoption leave.

An employee must normally have completed at least one years’ continuous employment with the same employer or an associated employer before the date of termination to have the right to require the employer to provide a written statement.

Dismissal under fixed term contracts

A fixed term contract expires on a date specified in the contract. However, it is only fixed term if the date is a maximum period, not a minimum period.

This definition is important. The ending of a fixed term contract without renewal would not be dismissal and therefore rights such as unfair dismissal rights would not be available.

Under common law, expiry of a fixed term contract simply brings the contract to an end. There is no dismissal and therefore there would be no compensation for unfair dismissal or dismissal by reason of redundancy.

That does not mean that employees in a fixed term contract cannot be dismissed! The Employment Relations Act (ERA) provides special rules. If the contract is not renewed, the non-renewal counts as dismissal. Whether that dismissal is unfair or not must then be decided according to the normal rules.

Save in exceptional circumstances, employers must always consult with employees before dismissing them - failure to do so will normally make the dismissal unfair. This rule applies even on expiry of a fixed term contract, especially if the employer might have alternative work available.

Since 25th October 1999 (in respect of unfair dismissal) and 1st October 2002 (in respect of statutory redundancy pay) it has not been possible for an employer to legally enforceable an exemption clause in an employment contract that waives unfair dismissal or statutory redundancy pay rights of the employee.

Additionally, since October 2005, fixed term contracts are automatically converted to contracts of indefinite length after four years.

It is unlawful for an employer to treat a fixed-term employee less favourably than he treats a comparable permanent employee unless the treatment is objectively justified. A fixed term employee who considers he is being treated unfairly can require his employer to provide a written statement setting out the reasons for the treatment.

The effect of these changes is that employee rights on dismissal are as strong under fixed term contracts as under permanent contracts.

Entitlement to reasons for non-renewal

Dismissed employees who have completed one years' continuous employment are entitled on request to a written statement from their employer stating the reasons for dismissal.

Neither the one year service requirement nor the need to make a request for the written statement apply in the case of a woman dismissed while she is pregnant or during her maternity leave period.

Time limit for claims

The normal time limit for bringing a claim under the Fixed-Term Employees (Prevention of Less Favourable Treatment) Regulations 2002, is three months from the date of the less favourable treatment or detriment to which the complaint relates or, where an act or failure to act is part of a series of similar acts or failures comprising the less favourable treatment or detriment, the last of them.

A tribunal may consider a complaint that is made out of this time period if, in all the circumstances of the case, it considers that it is just and equitable to do so.

Frustration of contract

Frustration happens is when an event occurs that is not reasonably foreseeable when the contract was made and not under the direct control of either party, which renders impossible further performance of the contract.

This concept is very important. There is no dismissal if employment comes to an end due to frustration of contract. The ex-employee has no right to unfair dismissal compensation, nor to redundancy pay (subject to statutory exception for redundancy pay if the contract has been frustrated by death of the employer).

Apart from death (of employer or employee) the following are examples of situations which could lead to discharge of an employment contracts by frustration:

  • illness (although this will normally have to be long and serious)
  • imprisonment (although this will normally have to be long in relation to the employee's length of service)
  • internment
  • change in the law

Garden leave

An employee who has been given notice of dismissal (or who has himself given notice to quit) and who continues to receive normal salary but is told not to report for duty during the notice period is said to be on garden leave.

Typically this happens if an employer needs to protect himself against competition or poaching of customers, clients or staff by a senior employee who has given notice or is to be dismissed. Restrictive covenants are unreliable and difficult to enforce against ex-employees so it may be attractive for the employer to send the employee home on garden leave.

An employer may have difficulty in imposing gardening leave if there is no specific contractual provision giving him the right to do so.

Maximum and minimum tribunal awards

In most cases, including unfair dismissal cases, the maximum cash awards which can be made by employment tribunals are specified by statute.

The top limit for many awards is a multiple of a week's pay.

The absolute maximum limit for basic award where an unfair dismissal amounts to £14,370 (30 weeks x £479).

Notice periods by the employee

The statutory minimum notice to be given by an employee is one week if he has been in continuous employment for at least one month. If employed for less than one month, the common law requirement of reasonable notice will apply.

An employee's contract can validly provide that the employee must give longer notice than the statutory minimum (contract valid even if not in writing).

Apart from in cases regarding constructive dismissal and frustration of contract, it is unlawful for an employee to resign without giving the notice, if any, required by his contract. However, employment contracts are "personal" - the courts will not order specific performance as a remedy for the breach. This means, as an employer, you have little choice but to grin and bear it - or in exceptional cases to sue for damages.

Notice periods by the employer

Any employee who has completed one month or more continuous employment with the same employer is entitled to at least a statutory minimum period of notice. He will of course be entitled to longer notice than the statutory minimum if his contract states so.

The statutory minimum notice entitlement ranges from one to twelve weeks as follows:

1 week if period of continuous employment is between 1 month and 2 years

1 week for each year of continuous employment between 2 and 12 years

12 weeks if the period of continuous employment is 12 years or more

Failure by an employer to give the minimum notice required by the Employment Regulations Act 1996 is a breach of contract and results in wrongful dismissal.

Death or employer or employee

Death of employer (or employee) normally automatically ends an employment contract. There will be no dismissal and so no possibility of an employee claiming unfair dismissal or dismissal by reason of redundancy.

Pay in lieu of notice

When employees are dismissed it is not uncommon for the employer to pay them lump sums "in lieu of notice" rather than require them to work out their statutory or contractual notice periods. The lump sum will normally be calculated by reference to the remuneration the employee would have earned if he had worked out the notice to which he was entitled.

Strike during notice

An employee who has been given notice of dismissal by reason of redundancy and who then joins a strike could be dismissed by the employer for "misconduct" (i.e. going on strike). This action would forfeit his right to redundancy pay. However, he will be able to claim statutory redundancy pay provided he works an appropriate number of extra days after the strike is over if the employer has so requested.

Withdrawal of notice

Neither an employer nor an employee who has given notice of termination to the other can unilaterally withdraw it. This position is completely clear once the notice has been accepted by the other or if the other has acted in reliance on.

However, if a “reasonable” bystander would have thought that what is superficially a resignation or dismissal was in reality no more than an unconsidered act which took place "in the heat of the moment" that should not have been taken at face value in the first place, the party may be able to withdraw the termination of employment.

Repudiation of the contract by either party

An employer or employee who breaches a fundamental term of the contract is said to "repudiate" the contract. The other party is then entitled (at his option) to treat the contract as at an end.

If it is the employer who is in serious breach of contract the ex-employee will be able to claim compensation for unfair dismissal or wrongful dismissal.

The ex-employee will also be automatically released from all primary contractual obligations to the employer.

If it is the employee who is in serious breach of contract, the employer will be entitled to dismiss the employee without notice or compensation.

Suspension of employee

In most normal salaried jobs an employee has no legally enforceable right to work. His employer's only obligation is to pay the agreed salary.

When suspension or lay off is in question, the debate will therefore by whether the employee is entitled to pay during the suspension period, not whether the employer has the right to suspend an employee. This will then depend on the terms, both express and implied, in the contract itself.

If an employer purports to suspend or lay off an employee without pay when he has no right to do so, the suspension may amount to a fundamental breach of contract. In that case the employee will be entitled, if he wishes, to treat the contract as repudiated by the employer.

An employee who is laid off without pay may be entitled to a statutory ‘guarantee payment’ from the employer. If a guarantee payment is not payable, he or she may be able to claim Jobseeker's Allowance from the State.

Maternity suspension

It may be necessary to suspend a pregnant employee because health and safety rules make it illegal for her to work. Since 1994, this will amount to automatic unfair dismissal.

The woman has the right to be offered suitable alternative work before she is suspended if the employer has any available. She has the right to complain to an employment tribunal if there is such work but it is not offered to her. The tribunal can award compensation.

If there is no suitable alternative work and the woman is suspended she will be entitled to remuneration (one week's pay per week) for so long as the health and safety rules forbid her coming back. However, she forfeits that right if she unreasonably turns down suitable alternative work.

You can read more about maternity leave rights.

Medical grounds

An employee who has completed one month's continuous employment and who is suspended from work on certain safety related medical grounds is entitled to remuneration from his employer during the suspension period, up to 26 weeks maximum the relevant grounds concern exposure to ionising radiation, lead and certain other substances which are hazardous to health.

The amount to which the employee will be entitled per week is a week's pay. This is the same as "a week's pay" in unfair dismissal and redundancy cases but with the important difference that there is no maximum "cap".

Please note that the information provided on this page:

  • Does not provide a complete or authoritative statement of the law;
  • Does not constitute legal advice by Net Lawman;
  • Does not create a contractual relationship;
  • Does not form part of any other advice, whether paid or free.
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